Managerial Challenges and Performance of Small and Medium Enterprises in Yemen

Journal of Research and Development Peer Reviewed International, Open Access Journal. ISSN : 2230-9578 | Website: https://jrdrvb.org Volume-17, Issue-9(I) | Sept - 2025 127 Managerial Challenges and Performance of Small and Medium Enterprises in Y emen Dr. Mangesh K. Shirsath1, Haroon Mohamed Sallam Faree2 1Research Guide & Assistant Professor, Adv. B. D. Hambarde Mahavidyalaya, Ashti, Beed 2Research Student, Email: Haroon24moh[email protected] Manuscript ID: JRD -2025(I)-170930 ISSN: 2230-9578 Volume 17 Issue 9(I)| Pp. 127-131 Sept. 2025 Submitted: 9 Aug. 2025 Revised: 20 Aug. 2025 Accepted: 20 Sept. 2025 Published: 30 Sept. 2025 Abstract: Small and Medium Enterprises (SMEs) represent a vital component of Yemen’s economic landscape, yet their growth and sustainability are severely hindered by managerial challenges. This study investigates the influence of managerial obstacles on SME performance, drawing on survey data from 394 enterprises in Sana’a and other cities. Using a descriptive-analytical method, management challenge scales from OECD and World Bank sources were applied, with data analyzed through SPSS. The findings reveal that deficiencies in skilled workforce (β = -0.317), administrative management practices (β = - 0.235), record-keeping systems (β = -0.199), and limited business networks (β = -0.120) significantly undermine SME performance. Conversely, employee training exhibited a positive effect (β = 0.159), underscoring the value of capacity development. Surprisingly, factors such as innovation, market knowledge, and operational experience showed no significant impact. The results highlight the urgent need for targeted interventions, including structured training programs, improved administrative frameworks, and supportive institutional mechanisms. Establishing a supervisory authority dedicated to SME development is recommended to address these constraints and strengthen Yemen’s economic resilience. Keywords: SMEs, Yemen, Managerial obstacles, Performance, Workforce skills, Training Introduction: Yemen has historically faced underdevelopment, resource scarcity, and political instability. The country's prolonged occupations and subsequent division, followed by unification in 1990, have contributed to minimal developmental progress. This is reflected in Yemen's low rankings on international indices (Saleh and K R Manjunath, 2020c). overlooked management can lead to decline, strategic approaches and proper attention can drive substantial growth. Research by Professor Gary Hamel highlights how effective managerial practices improve performance (Hamel and Breen, 2007).This research aims to examine how managerial challenges affect the performance of small and medium enterprises in Yemen. Background and brief review: Yemeni SMEs operate in an unstable environment due to political and economic issues, exacerbated by the COVID-19 pandemic. Despite their vital role in job creation and economic growth, they encounter numerous hurdles, including financial and marketing difficulties, political instability, regulatory problems, and management-related issues (Saleh and K R Manjunath, 2020b; Saleh and K Rajappa Manjunath, 2020). Digital transformation efforts are also hindered by the need for significant investment. Quick Response Code: Website: https://jrdrvb.org/ DOI: 10.5281/zenodo.16885235 Creative Commons (CC BY-NC-SA 4.0) This is an open access journal, and articles are distributed under the terms of the Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International Public License, which allows others to remix, tweak, and build upon the work noncommercially, as long as appropriate credit is given and the new creations ae licensed under the idential terms. Address for correspondence: Dr. Mangesh K. Shirsath, Research Guide & Assistant Professor, Adv. B. D. Hambarde Mahavidyalaya, Ashti, Beed How to cite this article: M. K. Shirsath, H.M.Sallam Faree. (2025). Managerial Challenges and Performance of Small and Medium Enterprises in Yemen , 17(9(I)), 127-131 Original Article Journal of Research and Development Peer Reviewed International, Open Access Journal. ISSN : 2230-9578 | Website: https://jrdrvb.org Volume-17, Issue-9(I) | Sept - 2025 128 However, addressing management challenges requires fewer external resources and can improve SME performance by fostering entrepreneurial skills and establishing training and guidance bodies (Saleh and K R Manjunath, 2020a). The central problem is the underperformance of Yemen's SME sector. While various factors affect business performance, management issues particularly restrict growth. This study, therefore, aims to examine how managerial factors influence SME performance, leading to the following research positions (RP): • RP1: Business process innovation capabilities significantly influence SME performance. • RP2: Workforce skill deficiencies significantly affect SME performance. • RP3: Administrative management practices significantly impact SME performance. • RP 4 Insufficient market understanding significantly influences SME performance. • RP 5: Employee training initiatives significantly affect SME performance. • RP 6: Limited operational expertise significantly impacts SME performance. • RP 7: Inadequate business networks significantly influence SME performance. • RP 8: Record-keeping systems significantly affect SME performance. Methodology: Research Method: This study used a descriptive-analytical approach with random sampling from two cities, selecting businesses randomly from each street. Following Rao soft calculator guidelines, 394 responses were collected (exceeding the recommended 382 for a 100,000 population). Measurement and Analysis: Management challenge scales were adapted from (Barriers, 2009; Group, 2016), while performance measures came from (Yu, Xiao and Bo, 2018). Responses were scored from -2 (strongly disagree) to 3 (strongly agree). Reliability tests showed strong internal consistency (α = 0.861 for challenges, α = 0.883 for performance). Data was cleaned using Cook's distance and analyzed with SPSS 26. Key Results: Most enterprises are owner-managed with skilled workforce requirements. However, 63.1% haven't implemented product/service innovations, only 34.3% provide employee training, and women represent less than half the workforce. Management responses to problems vary: 30.7% improve conditions preventively, 26.9% implement preventive procedures, 17.3% fix issues without follow-up, and 25.1% take no action. Results and findings: Sample Characteristics: The study included enterprises primarily from Sanaa (55.3%), with equal representation from service (36.5%) and manufacturing (35%) sectors. Most companies employed 5-19 workers (58.9% combined) and were 5-10 years old (54.8% combined), with sole ownership being predominant (68.5%). Regarding staffing, 75.6% of businesses lacked administrative personnel, while 24.4% had mostly administrative employees. Management Challenge Assessment: Survey responses revealed moderate consensus on several management issues. The highest concern was insufficient operational experience (M=1.75), followed by inadequate worker training (M=1.59) and workforce skill gaps (M=1.55). Respondents showed less agreement regarding administrative management problems (M=0.61), limited business networks (M=1.05), and market knowledge deficiencies (M=1.07). Innovation capacity received moderate ratings (M=1.32), while record-keeping scored similarly (M=1.38). Tables present the statistical findings regarding management challenges and performance metrics. Participants expressed moderate consensus on three primary concerns: insufficient operational experience (M=1.75), inadequate employee training (M=1.59), and workforce skill deficiencies (M=1.55). Conversely, respondents showed minimal agreement regarding administrative management issues (M=0.61), business networking limitations (M=1.05), and market knowledge gaps (M=1.07). Journal of Research and Development Peer Reviewed International, Open Access Journal. ISSN : 2230-9578 | Website: https://jrdrvb.org Volume-17, Issue-9(I) | Sept - 2025 129 Table 1: Sample Demographic Characteristic Category Percentage Count (N=394) Location Sanaa 55.30% 218 Other Cities 44.70% 176 Sector Service 36.50% 144 Manufacturing 35.00% 138 Employee Size 10-19 workers 30.50% 120 5-9 workers 28.40% 112 Business Age 5 years 29.90% 118 10 years 24.90% 98 Ownership Sole Ownership 68.50% 270 Administrative Staff Mostly Administrative 24.40% 96 No Administrative Staff 76% 300 Table 2: Management challenges Analysis Rank Management Challenge Mean Score Std. Deviation Severity Level Key Finding 1 Lack of Operational Experience 1.75 1.552 High Concern Most critical challenge 2 Training Workers and Employees 1.59 1.528 High Concern Significant training gaps 3 Lacking Skilled Workforce 1.55 1.41 High Concern Skills shortage prevalent 4 Records Control 1.38 1.631 Moderate Documentation issues 5 Ability to Innovate in Business Process 1.32 1.461 Moderate Innovation capacity limited 6 Lack of Market Knowledge 1.07 1.658 Lower Priority Market awareness adequate 7 Lack of Networks 1.05 1.544 Lower Priority Networking less problematic 8 Administrative Management 0.61 1.694 Least Concern Administration functioning Table 3: Key Findings Summary Category Top Issue Score Implication Demographics 75.6% lack admin staff 0.86 Structural management gaps Management Operational experience deficit 1.75 Critical skills development needed Performance All indicators below neutral 0.12-0.29 Widespread business struggles Reliability Both scales highly reliable 0.86 Results statistically robust Regression Analysis Results: Multiple regression analysis was conducted with SME performance as the dependent variable and managerial challenges as independent variables. The model explained 36% of performance variance (R² = 0.363, R = 0.603, p < 0.001), indicating moderate predictive power. Non-Significant Factors: Journal of Research and Development Peer Reviewed International, Open Access Journal. ISSN : 2230-9578 | Website: https://jrdrvb.org Volume-17, Issue-9(I) | Sept - 2025 130 Three managerial challenges showed no significant impact on SME performance: innovation capacity (β = 0.015, p = 0.80), market knowledge deficiency (β = 0.066, p = 0.19), and operational experience gaps (β = -0.038, p = 0.58). These findings contradict expectations about their importance. Significant Predictors: Five challenges significantly influenced performance. The strongest negative predictors were skilled workforce shortage (β = -0.317, p < 0.01) and administrative management problems (β = -0.235, p < 0.01). Moderate effects were found for inadequate record control (β = -0.199, p < 0.01) and limited business networks (β = -0.120, p = 0.02). Interestingly, worker training showed a positive effect (β = 0.159, p = 0.02), suggesting training investments improve performance. Research Position Testing: The analysis supported five Research Position (RP2: skilled workforce, RP3: administrative management, RP5: training workers, RP7: networks, RP8: records control) while rejecting three (RP1: innovation, RP4: market knowledge, RP6: operational experience). This indicates that workforce-related and administrative factors are more critical for SME performance than expected strategic capabilities Table 4: Multiple Regression Analysis Results Consistency: The findings align with previous research demonstrating that skill deficiencies and managerial challenges are primary obstacles for SMEs (Temtime and Pansiri, 2006). Results partially support (Aliyu, 2015) regarding managerial factors' significance, while confirming that human resource management practices substantially influence SME performance (Shafeek, 2016). The study reinforces that strategic management approaches are crucial for SME development (Ates et al., 2013) and that investing in HR practices like training yields measurable performance improvements (Forth and Bryson, 2018; Saleh and K R Manjunath, 2020c). Key Empirical Findings: The study revealed critical operational gaps: only 24.4% of enterprises involve employees in decision-making, 53% require skilled workers, 46% employ women, and merely 34.3% provide employee training. Just 30.7% of companies proactively address operational problems. Regression analysis confirmed five significant predictors of performance: skilled workforce deficiency (β = -0.317), administrative management issues (β = -0.235), poor record control (β = -0.199), limited networks (β = -0.120), and training provision (β = 0.159, positive effect). Conversely, innovation capability, market knowledge, and operational experience showed no significant impact. Conclusions and Recommendations: Yemeni SMEs face substantial managerial capacity constraints requiring targeted intervention. The study recommends establishing a dedicated SME supervisory authority to provide guidance, consultancy, and strategic support. This institution could address training deficiencies, improve administrative practices, and enhance organizational performance through structured capacity-building programs, ultimately helping SMEs overcome their most critical managerial challenges. References: 1. Aliyu, M. (2015) ‘Impact of managerial skills on small scale businesses performance and growth in Nigeria’, European Journal of Business and management, 7(5), pp. 109–114. 2. Ates, A. et al. (2013) ‘The development of SME managerial practice for effective performance management’, Journal of small business and enterprise development, 20(1), pp. 28–54. 3. Barriers, T. (2009) ‘Drivers to sme Internationalisation’, Report by the OECD Working Party, 13. 4. Forth, J. and Bryson, A. (2018) The impact of management practices on SME performance. IZA Discussion Papers. Managerial Challenge Beta (B) t-value p-value Result Lacking Skilled Workforce -0.317 -5.572 0 Significant Administrative Management -0.235 -4.979 0 Significant Records Control -0.199 -4.194 0 Significant Training Workers 0.159 2.224 0.027 Positive Effect Lack of Networks -0.12 -2.321 0.021 Significant Lack of Market Knowledge -0.066 -1.287 0.199 Not Significant Lack of Operational Experience -0.038 -0.543 0.588 Not Significant Innovation in Business Process 0.015 0.243 0.809 Not Significant Journal of Research and Development Peer Reviewed International, Open Access Journal. ISSN : 2230-9578 | Website: https://jrdrvb.org Volume-17, Issue-9(I) | Sept - 2025 131 5. Group, W.B. (2016) The World Bank Group A to Z 2016. World Bank Publications. 6. Hamel, G. and Breen, B. (2007) ‘Building an innovation democracy: WL Gore’, The future of management [Preprint]. 7. Saleh, M.A.K. and Manjunath, K R (2020a) ‘Moving towards digitalization in small and medium enterprises in least developed countries, Review of the case of Yemen’, International Journal for Modern Trends in Science and Technology, 6(8), pp. 233–239. 8. Saleh, M.A.K. and Manjunath, K R (2020b) ‘Review of historical and temporary challenges facing small and medium enterprises in Yemen’, International Journal of Trend in Scientific Research and Development, 4(3), pp. 752–764. 9. Saleh, M.A.K. and Manjunath, K R (2020c) ‘Small and Medium Enterprises in Yemen: Aiming for resurgence while facing managerial obstacles’, Shodh Sanchar Bulletin, 10(40), pp. 6–12. 10. Saleh, M.A.K. and Manjunath, K Rajappa (2020) ‘Small and medium enterprises in Yemen: Navigating through additional obstacles during Covid-19’, in 11th International Conference on Shifting Paradigm in Business, Economy and Society: Vision, pp. 1–12. 11. Shafeek, H. (2016) ‘The impact of human resources management practices in SMEs’, Annals of the Faculty of Engineering Hunedoara, 14(4), p. 91. 12. Temtime, Z.T. and Pansiri, J. (2006) ‘Perceived managerial problems in SMEs: evidence from Botswana’, Development and Learning in Organizations: An International Journal, 20(5), pp. 15–17. 13. Yu, D., Xiao, H. and Bo, Q. (2018) ‘The dimensions of organizational character and its impacts on organizational performance in Chinese context’, Frontiers in psychology, 9, p. 1049.